What happened
Shares of clinical-stage biopharmaceutical company Adaptimmune Therapeutics (ADAP 12.87%) fell 14.7% on Monday, dropping to $1.86. The stock has a 52-week low of $1.69 and a 52-week high of $6.86.
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So what
The company specializes in using cell therapies to fight various cancers. On Monday, it filed a preliminary proxy statement with the Securities and Exchange Commission (SEC) that mentioned a shelf-registration statement -- known as an S-3 by the SEC -- meaning that there's a strong possibility the company intends to sell additional stock to raise money.
Investors generally don't like shelf registrations for a number of reasons. Any stock sale dilutes the value of the shares they own. And an S-3 gives the company three years to complete the stock sale, which acts in a way to depress the price of the stock because bigger buyers know they don't need to buy the company's shares on the open market since they can wait for an offer of follow-on financing.
Now what
On the portfolio side, Adaptimmune has had some good news lately. It has said it plans to file a Biologics License Application with the Food and Drug Administration sometime this year for afamitresgene (ADP-A2M4), a T-cell receptor therapy to treat patients with synovial sarcoma, a rare soft tissue cancer. The company also has plans to start a phase 2 clinical trial with ADP-A2M4CD8 to treat esophageal cancers.
In its annual report, the biotech company said it has enough funds to get through early 2024. But based on where its therapy trials are, the company is unlikely to have any marketable therapies by then, which is the reason for the likely stock sale.
Adaptimmune does have some revenue from collaboration arrangements, however. In the fourth quarter, it said it had revenue of $1.4 million for the quarter and $6.1 million for the year, compared to $1.4 million and $4 million in the same periods in 2020. The problem is, its growth in research and development (R&D) expenses is increasing. Last year, it spent $111.1 million on R&D, up from $96 million in 2020. For the year, the company's overall loss was $158.1 million, or $0.17 per share.
Ultimately, investors know that clinical-stage biopharmaceuticals are a risky bet, but they also have the potential for huge payouts. In the long run, a stock sale, while it will dilute the company's shares, won't be as important as how Adaptimmune's pipeline advances.
